Question

On January 1, 2019, the Ramirez Company ledger shows Equipment $29,000 and Accumulated Depreciation $9,000. The depreciation resulted from using the straight line method with a useful life of 10 years and salvage value of $2,000. On this date, the company concludes that the equipment has a remaining useful life of only 4 years with the same salvage value. Compute the revised annual depreciation.

Answer 1

$4,500

Step-by-step explanation:

The revised depreciation going forward=remaining depreciable amount/4 years

remaining depreciable=cost-salvage value-accumulated depreciation

cost is $29,000

salvage value is $2,000

accumulated depreciation is $9000

remaining depreciable amount=$29,000-$2,000-$9,000=$18,000

revised annual depreciation=$18,000/4=$4,500

The revised depreciation yearly for the remaining four years is $4,500

The rationale here is that $9,000 has already been depreciated while the $2,000 salvage value is not to be depreciated